A highly anticipated and groundbreaking moment has come to pass in the South African FinTech regulatory sphere, as the Financial Sector Conduct Authority (“FSCA”) has released a General Notice published in the Government Gazette as well as the FSCA’s website on 19 October 2022, declaring crypto assets a “financial product” under the Financial Advisory and Intermediary Services Act, No. 37 of 2002 (“the FAIS Act”), with immediate effect.
According to the Notice, crypto assets shall be defined as “a digital representation of value” that is not issued by a central bank, but may be traded, transferred or electronically stored for payment, investment and other utility, which applies cryptographic techniques and uses distributed ledger technology.
To facilitate the transitionary period for financial service providers related to crypto assets, the said providers are only required to apply for the relevant licence between 1 June 2023 and 30 November 2023, thus allowing some time to prepare for the licence application process and moreover, the implementation of more comprehensive regulatory regime to follow.
Further to the declaration, the FSCA also published exemptions from Section 7(1) of the FAIS Act – that is, the requirement that a person may not act or offer to act as a financial services provider (“FSP”) unless issued with a licence under Section 8. Notably, the general exemption specifically applies to persons rendering financial services in relation to crypto assets. Hence, providers may continue to operate unlicensed, provided, amongst other things, that they apply for the issue of a licence within the aforementioned time period, in order to act as a financial services provider, i.e., a so-called Crypto Asset FSP (“CASP”)
This temporary exemption is merely to allow for transitional arrangements to be made in giving full force and effect to the declaration. It is important to note, however, that the exemption does not apply to financial services rendered in relation to crypto asset derivatives, which are already subject to the Financial Markets Act, No. 19 of 2012.
Finally, and for public comment until 1 December 2022, the FSCA published a “Draft Exemption of Persons rendering Financial Services in relation to Crypto Assets from Certain Requirements” which proposes to exempt licensed CASP’s, their key individuals and its representatives, from certain requirements of the General Code of Conduct for Authorised Financial Services Providers and their Representatives, together with the Determination of Fit and Proper Requirements, 2017.
Hanekom Attorneys is proud to have been directly involved on behalf of its clients in the public commentary process relating to the draft declaration published on 20 November 2020, thus ensuring their concerns and interests were adequately heard and considered. We are ready and equipped to assist CASP’s in navigating the new regulatory landscape, and address all your queries while on the path to operating a licensed and regulated business.